Yesterday we ran a blog post that fits into a now classic genre in development commentary. This genre, after some discussion, always ends with a conclusion like: “Solution X (a transparency law, microcredit, malaria bed nets, conditional cash transfers, web-based clever thing, eliminating business red tape, etc.) is moderately helpful, but a long way from a panacea.” Of course, nobody really claims explicitly “X will be a panacea!” But each new X is systematically oversold, expectations are raised way too high, and the expectations are always later disappointed.

Here’s why direct solutions to problems cannot foster development. Each direct solution depends on lots of other complementary factors, so the solutions can seldom be generalized across different settings; Solutions must fit each local context. Solutions that generate the highest payoff in each setting should be a higher priority than the lowest payoff solutions. Since there is little or no feedback on how well each solution is working in each local situation, there is little possibility for any such adjustments.

Development happens thanks to problem-solving systems. To vastly oversimplify for illustrative purposes, the market is a decentralized (private) problem solving system with rich feedback and accountability. Democracy, civil liberties, free speech, protection of rights of dissidents and activists is a decentralized (public) problem solving system with (imperfect) feedback and accountability. Individual liberty in general fosters systems that allow many different individuals to use their particular local knowledge and expertise to attempt many different independent trials at solutions. When you have a large number of independent trials, the probability of solutions goes way up.

Good systems make the private returns to decentralized problem-solvers close to the social returns. Again oversimplifying to drive home the big point, the market does this with private goods (even allowing for well-known exceptions of market failures), and a free political system is the best way known to do this for public goods (reward political actors in line with the social return to their actions).

The problem-solving systems could very well use some of the same solutions that were discussed above (a transparency law, microcredit, malaria bed nets, conditional cash transfers, web-based clever thing, eliminating business red tape). This leads to much confusion, as people then try to directly imitate particular solutions in the absence of a problem-solving system, which as stated above, leads to disappointing results.

A famous joke is that the Answer to the Ultimate Question of Life, the Universe, and Everything is 42.{{1}} Indeed, 42 could come out of a problem-solving system to solve a particular problem (the guests at my party have brought seven six-packs, will I have enough beer?), but is rather unlikely to generalize to other problems.

The problem-solving system is adapting solutions to local circumstances. And even more importantly, a problem-solving system coordinates the efforts of many different problem-solvers with nobody in charge (for example, in the market, prices serve as signals to coordinate the actions of many different suppliers to solve the problems of demanders).

Direct solutions to problems (say, using aid programs) still may be worthwhile as benefiting a lot of people. But a long list of many such solutions is not development; development is the gradual emergence of a problem-solving system.

UPDATE, Sunday July 11: new round of the Hayek wars as they relate to this post:

Friedrich Hayek is obviously the main source of inspiration for the ideas in this post. But hasn’t Hayek now been totally discredited by his association with Glenn Beck? A nice article in the NYT Book Review by Jennifer Schuessler discusses the Beck-Hayek phenomenon.

Beck was invoking Hayek to make the “slippery slope” argument that an extensive systemof social services leads inexorably to something like Fascism or Communism. Hayek’s association with this argument looks a lot more dubious once you realize that he was IN FAVOR OF an extensive system of social services. As Schuessler notes:

“The preservation of competition,” {Hayek} wrote, is not “incompatible with an extensive system of social services — so long as the organization of these services is not designed in such a way as to make competition ineffective over wide fields.”

I had the same argument with (guess who?) Jeff Sachs back in 2006 when he attempted to smear Hayek in a similar way.

Mr. Sachs disses the great Hayek by repeating the old canard that Hayek thought any attempt at taxpayer-funded social insurance would put us all on the “Road to Serfdom.” This is an especially strange charge, since Hayek (while certainly opposed to the social engineering that proponents of a full-blown welfare state usually have in mind) himself calls for some form of taxpayer-funded social insurance against severe physical deprivation on pages 133-134 of “The Road to Serfdom.” Mr. Sachs, who is currently best known for his star- driven campaign to end world poverty, has apparently spent more time studying the economic thinking of Salma Hayek than that of Friedrich.

Hayek’s Road to Serfdom is a superb statement of how a spontaneous order was responsible for Western prosperity, following rules based on individual liberty, and Western prosperity was NOT the result of social planners trying to directly solve social problems. That’s how it inspired the post above.

Would something like rural electrification be an example of a system or a solution? It is a system in the sense that it enables development in terms of financial security, commerce, health, and education. But it is a solution in the sense that it doesn’t develop organically, the way a functioning democracy or free market appears. Great post.

Sam, I share your skepticism about a “process approach” in aid, because that usually means trying to get a top-down aid bureacracy to behave like a bottom-up system, which bureaucracies will not do if you don’t change the whole nature of the hierarchical aid bureaucracy. Also the “process approach” lets the aid agencies use “process indicators” as measures of success, which means they are even less subject to being held accountable for results.

Here’s the misunderstanding: I am NOT talking about systems in aid, I am talking about systems in the poor society, like those I cited of markets and democracy.

Professor Easterly is correct, as usual. The only problem is that he is too modest. In fact, the point he makes applies much more broadly than development. See Karl Popper’s “All Life Is Problem Solving (1999).

But one reason I support (and work on) transparency is precisely because I think greater transparency is likely to support the emergence of an effective problem solving system. So I wonder if you are right to have transparency (which I view as an intervention to support problem solving systems) on the same list as bednets and microcredit, which are particular possible solutions?

Not a tautology if we are using language precisely. Paul Collier and Jeff Sachs might say they agree with systems, but their work is all about just listing direct generalized solutions.

How to get there? Yes, that’s the next question, requires a post (or a book) on its own.

No, I’m not talking about cybernetics. That was an approach to understanding systems that failed, at least as far as economics goes.

Am I talking about processes vs. outcomes. I would say I am talking about rules vs. outcomes. Certain rules make possible problem-solving systems, like the whole set of rules surrounding the concept of individual liberty. Rules cannot just be decreed, they themselves have to emerge so that they really gain wide acceptance. (I am obviously drawing on Hayek a lot here.)

I totally agree with the thesis. most aid treats a developing country as suffering from an acute situation when the reality is that the situation is chronic.

chronic conditions (think time and cycles) are systems functioning at some level. To get the systems functioning at another level requires changing the system not just a single point within it. The levers (disease eradication, legal reform, human rights, anti-corruption, political stability, infrastructure, education) are interdependantly sustained at a a certain (low) level, shifting one using exogenous reources will not necessarily shift them all into higher performance.

most likely finding and wiring in positive feedback loops within the system (culture/state) will hopefully lead to more internally sustained development from within.

Happy to claim ‘totally but how to get there’ and agree with this post in general.

But also it seems that “capacity building” has become an evil and over used term in some circles. To me, ‘capacity building’ has always been about helping create or strengthen environments, skills, knowledge and systems that enable people to solve their own problems or work together to solve them.

I don’t think that anyone who knows their stuff would ever believe that there is one be all, end all solution. It’s all complex all the time, and I think most ‘development practitioners’ and people who have spent time ‘on the ground’ working with ‘development processes’ know that full well.

Development, and life in general involves process as well as outcome. What works is extremely difficult to evaluate because people and social changes are involved, and nothing is ever stable. Sometimes people find things that work in some places. Sometimes they don’t. Why is it so difficult to extrapolate from our own complex personal lives to broader complex systems?

How do you encourage problem-solving behaviors in individuals and institutions. This is certainly not rewarded in most schools, governments, organizations, institutions or societies.

And why are there so many media outlets, contests and donors that prop up and reward individuals, organizations and corporations that market shiny silver bullet solutions?

response: Alan, I’m grateful to you for always being more skeptical than I am, making me look like a moderate (just teasing).

I think the principles of good problem-solving systems (such as finding ways to make private return = social return) will not vary much by country, even though the practical implementation will vary.

Also a bigger issue, it’s impossible to discuss these issues in a value-neutral way. Some values, like those supporting individual liberty, have varying degrees of acceptance across different societies, or differing degrees of suppression of those values by those now in power, which is going to have a big impact on whether the principles of a successful problem-solving system will really be accepted.

With experience working as a teacher and in subsequent years with local and international NGO’s on HIV/AIDS projects in (formerly British) east and southern African countries one glaring truth continues to color my daily interactions; the substantial lack of critical thinking and problem solving skills.

While standing in long queues at the Ministry of Transport to register a vehicle, I’ve never understood the complacency with which both the customers and the civil servants navigate byzantine bureaucracy without complaint or question. I’d argue that this same mindset also applies to the heart-wrenching fatalism that has allowed the AIDS epidemic to ravage the region.

I reject the (subtly racist) notion that complacency and fatalism are some sort of intrinsic cultural preference. I see these tendencies as products of the combination of generations of subjugation with little/no investment in education and decades of post-colonial malaise that has not seen much effort to shift education from a 1960’s British COSC curriculum that emphasizes wrote memory and discipline over problem solving and curiosity. In fact, from my teaching experience I would go as far as to say curiosity seems to be actively discouraged throughout primary & secondary education.

If students are discouraged from intellectual curiosity in the nurturing environment of the classroom how likely are they to demand transparency and accountability of their governments?

Education is not the exciting development investment major bi-laterals seem to fund. The investment is substantial, the process for implementing change is highly political and returns can take decades. In an environment where the attention span of bi-lateral funding seems to be about 3 years (never guaranteed) substantial foreign investment in education seems doubtful.

This is one “systemic fix” that takes a sizable and enduring commitment. I have little faith in national governments to address education in a serious way and the faddish preferences of international donors offers no encouragement…

This is getting long but the one idea that I like from what I’ve seen is a sort of Global Fund for Education. There are undoubtedly many substantial flaws to the Global Fund system but when it works right, it seems to work better at pushing systemic change than any exogenous mode I’ve seen so far.

Yes, development requires problem-solving systems! From the perspective of development as an historical process, this is a useful way to think about it. But from a practical perspective of development as an activity pursued by foreign aid workers, domestic political leaders, entrepreneurs, or other: how does one promote problem-solving systems? I think by analyzing the current problem-solving system, diagnosing deficiencies, and crafting a solution. This is similar to Owen’s point about transparency laws: they are a solution for improving the problem-solving system.

This line of reasoning brings us to a sort of meta-development: while solutions to particular social problems cannot create development, solutions to particular problems in the problem-solving system can. But the problem is, every advocate of a particular solution can reasonably argue that their solution improves the problem-solving system. Transparency and similar good governance advocates certainly can (Owen’s comment), education advocates too (Bula’s comment), and health advocates as well.

So while I appreciate the effort to promote systemic thinking, I think you do owe us a longer post/book on how to get there.

P.S. I also appreciate the Hitchhiker’s reference. I made one myself just two days ago atFind What Works. Yeah, shameless plug, but a relevant one too.

@aeurswald: Thanks for putting it in the company of the great man, but I’m afraid you are missing the point.

Hirschman was ahead of his time in believing in adjusting the solution to local circumstances. However, he still believed in direct solutions from the top down rather than individual freedoms that would make for a problem-solving system.

Considering the number of exogenous variables out there in a constant state of change, success when it comes, tends to be random rather than planned.

The market economy works due to the massive amount of entrepreneurial initiatives which through trial and error are distilled into a smaller number of successes which in turn are subject to copycat behaviour by the replicative entrepreneurs.

While the aid industry is not short on ‘aid entrepreneurs’, there is no direct feedback mechanism to sort out, through trial and error, the winners from the losers.

Planning, systems and trials have their limited uses and today, after half a century of development aid, we by and large have learned what does not work; but to predict the success of a certain new initiative over another? Paul the Octopus is probably as prescient as anyone else – and Paul is on a hot streak.http://www.cbc.ca/cp/Oddities/TS1502.html

You’re welcome! You are as close to Hirschman as we have in development economics today. But I’m not sure your giving the master his due here…

To my reading, the breakthrough with “The Strategy of Economic Development” was that it introduced systems thinking into development economics, and in so doing emphasized the importance of understanding complementarities in the dynamic process that is the evolution of a society. This is just as in your post.

Furthermore, Hirschman begins “The Strategy of Economic Development” (p. 1, line 1) with essentially the same lament that you open with above–though your refer to “solutions” and he refers to their inverse, “prerequisites”:
“The intensive study of the problem of economic development has had one discouraging result: it has produced an ever lengthening list of factors and conditions, of obstacles and prerequisites. The direction of the inquiry has proceeded from thoroughly objective, tangible, and quantifiable phenomena to more and more subjective, intangible, and unmeasurable ones.” (Does this sound at all to you like the state of development economics today, 53 years later? Does to me.)

And what was the fad of the day in Hischman’s time, the final straw that drove him to write a book emphasizing the need for systems thinking? Entrepreneurship, of course. “Among the proximate causes of economic development, the supply of entrepreneurial and managerial abilities now occupies in official documents a position of pre-eminence at least equal to that of capital.” (If not clear from the except, Hirschman was not happy about this.)

Projects that address one or another “prerequisite for development” (a.k.a. “solutions”) are not the way forward according to Hirschman. What is required is to take the actions required so that developing economies become learning, self-sustaining systems. (See ref. to Herbert Simon on pp. 47-48.)

So I stand by my contention that this post is Hirschman redux … Pro-system, impatient with entrepreneurship as a panacea.

Whether you (and he) are correct to prioritize systems over initiative or general rules over specific ventures is another matter altogether. But the single point raised by numerous readers above is from my standpoint the critical one: “how do we get there?”

Both solutions and systems matter. The one creates the other, and vice versa. To absolutely prioritize either one (as you do in this post) makes no sense.

I see these tendencies as products of the combination of generations of subjugation with little/no investment in education and decades of post-colonial malaise that has not seen much effort to shift education from a 1960’s British COSC curriculum that emphasizes wrote memory and discipline over problem solving and curiosity. In fact, from my teaching experience I would go as far as to say curiosity seems to be actively discouraged throughout primary & secondary education.

I’d also question whether a new way of educating new generations of citizens is necessary. After all, the places where the emergence of ‘problem solving systems’ and entrepreneurship has produced rapid development takeoff (countries in East Asia) have never been known for emphasizing ‘creativity and curiosity’ in education.

Considering entrepreneurship as a systemic panacaea, donors can work with local firms to identify and fix their priority constraints to growth, such as access to credit, value chains, energy, regulation, etc. By focussing on firms, local tax and jobs increase, enabling social development and providing a foundation for political stability. Firms are the basis of systemic sustainable development. The problems are (i) this is slow for the poor, (ii) people are impatient, and (iii) the charity mentality does not see making things easier for successful local firms as a path to reduce poverty.

Very helpful Bill. I’ve been drafting an unlikely-to-ever-be-completed post entitled “Move over economists, let the technologists drive” based on the thesis that technologist (namely the folks who built the internet) have important insight into how to build and influence these problem-solving systems learned during their 40-year effort to create the global internet.

The essence of the insight is, instead of solving problems directly, building “platforms” that support large numbers of people coordinating to solve their own problems. The Internet is an example of a platform as are Windows and Linux. As you describe, the market is a platform (and democracy too?)

Tim O’Reilly has captured some of these lessons in his “Government As a Platform” chapter (http://opengovernment.labs.oreilly.com/ch01.html). The advantage technologists have had in arriving at these lessons is they are forced to deal with the details, with “local circumstances” – the code has to work.

However, these lessons have cross-sectoral application beyond software & hardware and we’re now seeing the technologists move from their internet startups into government and beyond planting the seeds of this approach. May they find fertile ground.

It does seem like the point here is that it’s one thing to “know” the solution and it’s another to know i.e understand the problem. To truly solve a problem you have to be able to clearly understand it and its root causes. You also have to understand what would be enough to solve the problem well enough to be effective and to do so efficiently. If you know the problem you can also measure success. In companies there are sometimes millions of dollars spent on a solution only to find it didn’t really solve the problem (I’m fixing one of those things right now). Bottom up thinking will lead you to a good enough solution, you may fail fast but you won’t waste as much time, money & resources doing so. 😀

I disagree with your comment on Paul Collier. At least in Breaking the Conflict Trap, he and his team laid out a set of criteria that have to be met to break out of the trap. If you say that rule sets are systems then I must also point out that he emphasizes the importance of rules in the form of institutions.

In accordance with Philip Auerswald’s fine comments on Hirschman, the last paragraph in Hirschman’s Foreword to my development book is:
“In the end, the book speaks of a series of ways in which development agencies can experience blocks to learning, and singles out the “long confrontation between man and a situation,” which, according to Camus, can be so fruitful for the achievement of genuine progress in problem-solving. This is the opposite of overconfidence in the solvability of all problems, which Flaubert attacked and named “la rage de vouloir conclure.” “

Easterly: “I think the principles of good problem-solving systems (such as finding ways to make private return = social return) will not vary much by country…”

Exactly! Human nature is the same everywhere. We act differently because the incentives are different.

Witzel: ““Move over economists, let the technologists drive”

That is where economics in general and developmental economics particularly went wrong: technologists don’t understand that the subject matter is different in technology and social sciences. To paraphrase Hayek, technology is a simple subject; social sciences are complex. In tech, electrons always behave the same way; in social sciences humans act in very different ways. The “math” economists of the late 20th century could never get this into their heads and they destroyed any value that mainstream econ might have had for practical use.

I would quibble only about the need for democracy. Free markets in the West worked best when we had less democracy and an elite committed to freedom ruled. Throughout the West, freedom in the markets has withdrawn in direct proportion to the advance of democracy. That’s because only a small portion of the population of any nation will ever grasp the counter-intuitive arguments for free markets. Most people see democracy as a way to take from the rich and give to the rest of us.

Governments will always allow a small amount of market freedom, as China has, in order to keep people from starving to death, but it will always be seen as a necessary evil. The more the government responds to the will of the majority, they more it will control markets and redistribute income.

fundamentalist, I take your point that the realities of social life confound the simple theories of the sciences. I think the insights from technologists – not abstract science-types but people who make stuff work – are important approaches to engage people, share information, build collaboration, come to agreement, and ultimately solve problems at a large scale. The insights are about process, not theory.

[…] Easterly wrote a great post today called “The Answer is 42! Why Development is not about solutions, it’s about problem-solving systems” which looks at a similar problem in development economics. After making a similar list of […]

[…] Bill Easterly understands the flaws in the search for panaceas in development: Yesterday we ran a blog post that fits into a now classic genre in development commentary. This genre, after some discussion, always ends with a conclusion like: “Solution X (a transparency law, microcredit, malaria bed nets, conditional cash transfers, web-based clever thing, eliminating business red tape, etc.) is moderately helpful, but a long way from a panacea.” Of course, nobody really claims explicitly “X will be a panacea!” But each new X is systematically oversold, expectations are raised way too high, and the expectations are always later disappointed. […]

[…] a job, but will the institutions behind international aid let that happen?The quote above is from William Easterly.Related posts:Individuals and Society in Japan Posted: 10 July 10 Category: Blog‹ Love, […]

[…] Bill Easterly makes a Hitchhiker’s Guide to the Galaxy reference when discussing solutions vs. problem-solving systems. I made one earlier in the week when discussing stuff I carry around. His is better. […]

[…] This is also true for much of the “nonprofits need to be more entrepreneurial”-debate where so much centers on what nonprofits should do rather than providing means for entrepreneurial processes to emerge. Read Easterley’s entire post here. […]

[…] social_url = 'http://developeconomies.com/?p=1469&#39;; Yesterday I referenced William Easterly’s explanation of how development happens. According to Easterly, in development, it is problem-solving systems […]

[…] Jul William Easterly’s article “The answer is 42! Why Development is not about solutions, it’s about problem-solving systems” has generated a lot of buzz for arguing for a bottoms-up, grass-roots, localized problem-solving […]

[…] post by my coworker Meredith Startz. Meredith had in turn written her post in the context of a post on Bill Easterly’s blog Aid Watch, which is also worth reading. This was my first post on the IPA blog and I hope to be a […]

[…] administrator Andrew Natsios. Meredith Startz offers insight into Bill Easterly’s argument that development is not about solutions, but creating problem-solving systems. Last but not least, Ranil Disannayake urges us to cut through the white noise and pay more than […]

[…] That is from a nice post by Russ Roberts on an entry by Bill Easterly titled "The answer is 42! Why Development is not about solutions, it's about problem-solving systems." […]

About Aid Watch

The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

"Conscience is the inner voice that warns us somebody may be looking." - H.L. Mencken